Would you believe that one of the most common questions I get from accountants is how to price their services? Today’s guest is the Co-Founder and President of the American Institute of Certified Tax Planners, Dominique Molina. She is a best-selling author, frequent television guest, and media expert on tax issues. She was previously named one of the “Top 40 Under 40 Most Influential Accounting Professionals” by C.P.A. Practice Advisor Magazine. Your pricing strategy will determine so much about your business – the profits you make, the clients you work with, and the number of hours you work. But so many accountants don’t fully understand all of their options.
There are five basic ways to price your services. Before you decide on one, take time to learn the pros and cons of each. You may be surprised by how such a simple choice can impact everything about your business and lead you to an abundance of clients! In this episode of The Abundant Accountant podcast, The Pitch Queen and Dominique Molina discuss five major pricing strategies and show how each of them impacts your business. By choosing the best pricing structure for you, you can prepare yourself for many clients! Enjoy, and thank you for listening and tuning into The Abundant Accountant Podcast!
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Michelle Introduces Dominique Molina and her business.
Here are a few key secrets we talked about in this episode:
- Your pricing strategy is one of the most important decisions you will make about your business and will impact everything!
- The pricing strategy that you choose reveals what is important to you.
- There are 5 basic pricing strategies: hourly, flat-rate, retainer, free or market value, and value-based pricing.
- What are you being paid for? Your time, your expertise?
- In hourly pricing, you are being paid for your TIME.
- Time is limited – we only get 24 hours per day – once it’s gone, it’s GONE!
- Our industry is so unique it is hard to do one thing for multiple clients – most of the work is so unique it cannot be replicated.
- Hourly pricing is harder to leverage.
- Flat fee pricing covers a task from start to completion but is often estimated based on the time it takes to do the project.
- Another option is retainer pricing, but what is the cost based on? Most accountants will base it on their TIME rates.
- Some people use a FREEpricing strategy to convert free clients to paying clients.
- Market value is when accountants and tax professionals charge what the market will handle by looking at what peers and colleagues are charging.
- Value can be defined as the maximum amount that a customer will pay for anything.
- Customers don’t always care about the nitty-gritty or the hard work that goes into getting them the result – they care about the RESULTS you bring them.
- Value-based pricing is based on those results and outcomes!
- Value-based pricing asks if you helped your client achieve their goals. If so, get a piece of those results as your fee!
- You must know what is special about what you offer when you charge value-based pricing. You have to provide opportunities and skills that no one else can.
- Keep your client front and center!
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P.S. Valued-based pricing is my favorite way to price services, but what does that mean, and how can you ensure you’re using it correctly? THIS BLOG POST can help!
P.P.S. Do You want to MAKE MORE MONEY, WORK FEWER HOURS?
Join me so you can unlock the secrets to growing a profitable accounting firm with less stress by joining our upcoming Abundant Accountants Masterclass!
You will learn:
- The easiest ways to sift through clients and get to the RIGHT ideal clients!
- Proven tactics to get paid instead of giving away FREE advice!
- How to stop competing on price FOREVER!
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The Best Pricing Strategies For Accountants And CPAs With Dominique Molina
In this episode, we have a very special guest, the President and Founder of the American Institute of Certified Tax Planners. With years of experience as a Certified Public Accountant, our special guest has worked with many top business owners and investors using proactive tax planning to help them keep more of what they earn. Our special guest is a keynote speaker, teacher, bestselling author and mentor to tax professionals across the US.
Before we get into the nitty gritty, I’m eager to discover more about those of you who read. How can you do this? I’d like to take a moment to extend an invitation to subscribe and leave a written review so I can keep on delivering the content you want and love. Before you subscribe and leave a written review, I want to say thank you for helping me continue to deliver the content that you love.
With that said, as many of you know, sharing is caring and I want to make sure that you take a screenshot of this episode on your phone. In the end, when you’re finished reading it, tag me, Michelle Weinstein and our incredible guest, Dominique Molina. Post it on your LinkedIn feed and #TheAbundantAccountantPodcast. Share with us the biggest takeaway you had from this episode. What was one a-ha moment that you had? We will make sure to share it on all of our social platforms. Let’s welcome Dominique to the show.
Thanks for having me.
Thank you so much for being here. This is well overdue, for sure. Can you share with everyone, all the accountants reading, what it is that you created for all CPAs, enrolled agents and tax attorneys across the country?
The simple answer, Michelle, is a much better life and work lifestyle, premium fees, working fewer hours and fewer deadlines, stress and pressure, which seems hard to believe, especially since everybody’s pulling their hair out with deadlines and things of that sort. We’re going to be talking about an important topic and that’s my specialty. How do you get people to pay you a lot more so that you can afford to work with fewer clients, have a much more scalable model if that’s your choice and have a much better life? What’s not to love? It’s the perfect day to talk about it.
It is the perfect day to talk about it because it’s all full of love. I’ve personally heard this question more may be going up on 1,000 times. How do I choose my pricing model? I get it because I’ve talked to a lot of you who are reading. How you charge for your expertise is one of the most important decisions you’ll make as an accountant, old agent or bookkeeper. Whatever you’re doing in this field, this is the most important thing you should have figured out. Dominique is the person to answer all these questions.
In this episode, we are going to explain the different pricing models and which pricing model would work best for accountants and your firms. Also, how to get the prices that will stick. That’s what we’re going to be discussing. Pay good attention because you’re not going to want to miss any of what we’re talking about.
You said a couple of key things in there, Michelle. Having pricing for your expertise or getting paid for your expertise is a big one. It’s what you are getting paid for. The second one is this is the most important thing that you should have hopefully figured out but if you haven’t, you’re not alone because most people adopt pricing standards from somewhere. Whether you’re in business and you’re starting or you’ve been in business for 40-plus years, it is possible to change your pricing model. Stay tuned because we’ve got a lot of great information for you.
Dominique, the first thing we want to tackle is hourly pricing. What are the key things that every accountant should know about hourly pricing? Is it a good option? Especially products that have deliverables. Share with us all of your knowledge on hourly pricing.
This goes back to what you are getting paid for. Believe it or not, when I started my CPA practice, I didn’t stop to think about that question. It was more in my subconscious that I get paid for what I do. The hourly billing model is especially important because if you’re choosing to use the hourly billing model, what you are saying and communicating to everyone is that you’re getting paid for your time.
What you do with that time is a mystery. Oftentimes the clients have no idea and they’re looking at the bill going, “How did it take you that long? It shouldn’t take that long. Why are you charging me for research? You should know all this stuff already.” In that model, you are getting paid for your time. A big downfall to that is that time’s limited. We only have 24 hours in a day. Even if you’re scaling and you have other people working for you, they only have 24 hours in a day. Time is very difficult to leverage unless somehow you’re producing something in that time that you can use in multiple places.Time is very difficult to leverage unless you're producing something in that time that you can use in multiple places. Click To Tweet
Can you give us an example of that, Dominique? If someone is stuck on the hourly model, they’re not wanting to change or try something new, can you give us an example of what you mean by doing something that you can use in multiple places?
Let’s say I have a good friend of mine that’s in Central Florida and she developed what she calls handy handouts. These handy handouts explain a lot of frequently asked questions that she was getting from new business owners that were coming in and saying, “What kind of entity should I be in? Do I need a business license? Whom do I call for this and that?”
She spent some time creating this resource and has been able to sell it over and over again for $1,000. In that story that I shared, she’s not using an hourly billing model. If she were, she would get paid for the 4 or 5 hours that it took her to put that together. Yet, she’s been able to charge for the product in a way that she gets paid over and over again for that same work that she’s doing for multiple clients in that same hour.
Let’s say that she was doing that for five people. She could charge those 5 people for that same 4 or 5 hours but she’s able to leverage that at the same time. How often does that come up in our world? We’re doing customized work. I don’t know about anybody else reading but very infrequently do I ever do a tax return that’s identical for anybody else or accounting, bookkeeping, payroll or whatever it is. Most of the time in this industry, it’s very difficult to do that and leverage that same hour for multiple people.
It’s a good idea if someone is stuck on staying in the hourly model. How can you do something once and duplicate it or do it times five? I don’t know the word for that but I’m sure there’s a five-plicate it option.
It’s a quintuple.
What about another pricing model, like project-based pricing?
This is where things sometimes can get confusing because the term that we use in the industry is flat fee pricing. It’s exactly as you’ve described, Michelle. It’s project-based, meaning somebody needs a project done, whether it’s an audit, a compilation, a review or a tax return that includes these forms or even a monthly bookkeeping service. You’re assigning a price for all of that work and what’s included in doing that.
Some people say that when they’re flat pricing, they’re interchanging that term with value pricing. It can be value pricing but here’s how you can tell if your flat fee pricing model is value or something else. It all comes down to what is underlying the price. What I know a lot of firms do is they will quote a flat fee but it’s based on an estimate of the hours it’s going to take to complete that job.
It’s the same thing in the tax return world. If I know that it takes me roughly an hour to do a Schedule A and an hour to do a Schedule E and fifteen minutes per trade on a Schedule D and I’m getting this all muddled up, even though I’m quoting one fee for the whole project, I’m still using an hourly billing model.
If I base the price on something else, such as the value that’s created from that project, it is a combination of a flat fee model and a value billing model. You can still all come back to hourly billing, even though you may be giving one price if it’s based on the number of hours it’s going to take you or what you estimate.
From what we’ve shared so far in pricing models, what would you say are the pros and the cons for anyone who’s considering, “I need to make a change. What I’m doing isn’t working. I want to make some more money, work a little bit less and have more time for some fun?”
It’s important to know all your options. We’ve talked about 2 different pricing models but there are 3 others as well that exist in the industry.
What about retainer pricing?
For retainer pricing, you still have to understand the underlying concept that it’s based on. If it’s based on an estimate of the number of hours, then you’re using hourly billing. Some people can price based on costs. In that case, what they’re doing is estimating how much it’s going to cost them for a project or an engagement to completion. They’re then hopefully doing some markup on those costs.
If I know that I’m paying my bookkeeper $25 an hour, I might bill my bookkeeper out for $50 an hour. That’s a combination of hourly billing and pricing based on costs. Some people in the industry, believe it or not, give it away for free and that certainly can be a viable model. It’s called the loss leader. We see this everywhere in the industry. We see Twitter. Twitter’s a free model. You can go on, it doesn’t cost you anything but Twitter makes a boatload of money. How do they make it?
We also see a lot of financial advisors using this model because they want to attract in their ideal type of customer. One way to do that is deeply discounted or even free accounting or tax services. That’s another option. Finally, there’s pricing based on what you think the market will bear. Sometimes that is either a flat fee or even hourly billing but what you’re doing is establishing your prices based on what you think your competitors are charging or what your response has been from using that price with clients.
There’s one other one, which is your favorite.
My favorite is value pricing.
Let’s talk about your favorite and get into the nitty gritty and the meat of things right here.
In value pricing, you have to understand what value is, to begin with. Value is about what kinds of results are you creating. Let’s say that your objective is to help somebody increase their profits or improve their take-home pay by helping them to budget and cut expenses. Value pricing might be a good solution for you as long as you’re creating that value.
What you’re doing with value pricing is you are capturing a piece of that value and using that as your price. A lot of times, people say, “What is value pricing? What is that value question?” It’s the maximum amount that a customer would pay for anything. We can use this in a lot of other different forms but as far as it goes in the accounting industry, we want to base it on results.
What are the outcomes? I got to tell you something. Nobody cares about their bookkeeping, payroll, tax returns or any other number of things that we are amazing at. We know what goes into it. Unfortunately, our clients often don’t understand what it takes to get that job done. That’s where it’s difficult then to have an effective hourly pricing model because people don’t understand what it is that we do and how hard it is.
At the same time, it’s like, where are you getting paid for all the effort that goes into even learning this stuff? An estimate came out from the IRS when tax reform was released on how long it would take people to understand the new laws and the estimate was 2,000 hours for a professional to study enough to be able to assist their clients. Where do you get paid for those 2,000 hours in an hourly billing model?
I have an idea, though. Don’t you teach accountants, CPAs, EAs and tax attorneys how to do that in a less amount of time, not 2,000 hours?
The 2,000 hours are irrelevant. It takes however long it takes. Some people may learn faster. Some people may learn slower. Some people may use resources in education that are better and more effective at helping them learn. The point is that generally, in an hourly billing model or even in a cost billing model, you’re not capturing the real costs that go into that. That includes things like time, costs for education and all of that stuff. If you think about it, what we’re able to do for people is what they want after all. Nobody wants what we deliver. They do it because they have to but sometimes we’re also creating results based on those deliverables that we produce.
It’s the outcomes. You said something key. Not only do they not care about any of the details but they want to know the outcomes. This is the first time I heard why isn’t anyone incorporating the teaching, the schooling you’ve been through, the Master’s degree you have, the additional investments you made in your education and adding that as part of your value-based pricing. That’s a key element that a lot of people are missing.
It is because even if it’s counting or on-the-job training and you’ve been at this for 10 or 15 years, you have developed wisdom and knowledge over those years. You should be compensated for that.
Based on all of the years of doing this and being the leader of the pack of sharing and teaching value pricing, let’s hear all about it because this is the one that you stand for the most.
It’s going back to that question you asked at the top of the episode, Michelle and that is what are people buying from you? In a value pricing model, you’re focusing on the fact that the customer’s purchasing value is from you. They’re not buying hours. Hours don’t relate to the value that you create. It takes however long it takes. If I’m an accountant and I can take those financial statements that my firm has created, sit down and analyze that with the business owner and help them make decisions that lead to less expense and more money in their pocket, that’s value.A value-pricing model focuses on the customer's purchasing value from an accountant. They're not buying hours, and hours don't relate to the value you create. It takes however long it takes. Click To Tweet
We should be paid for that value. Rather than basing it on what the market will bear, on costs, giving it away for free or on the number of hours it takes, we want to focus instead on what results we are helping people create. That’s what gives you the opportunity to charge a lot more than things like what the market will bear because we’re focusing on something different.
You and I have spoken about what kinds of results you are bringing to the client. If you’re increasing the amount of money that they’re taking home or providing more money in the business to pay the staff more so your staff won’t leave you or whatever that is, you’re taking a piece of the value that you’re bringing with your knowledge and expertise.
That’s where you get into the power of leverage. Whether you’re looking to build a much simpler business, it allows you to cut down the number of clients and maybe work with a handful so that you’re not so crazy all the time, juggling so many deadlines. If you’re looking to ramp up and scale, this is where you can duplicate this with all of your teammates as well so it doesn’t matter how long it takes you because the number one focus is value.
The problem with that is the number one focus is value. If you don’t understand what the value is that you bring to the table or it’s a nebulous idea that’s difficult for a client to comprehend what the value is, say, “I help them sleep at night so they don’t have to worry about the IRS come knocking at their door.” It’s hard to quantify that.
If you’re not already offering a service that creates value, you can. It’s not too late. You can look at what services you’re offering and what you’re good at and what you most enjoy and then find a way to make it more valuable to the client. Use the information that you help put together to be meaningful and help them understand how meaningful it is and help them do something with it that makes a big difference.It is never too late if an accountant is not already offering a service that creates value. Look at which offers you are really good at and enjoy, then make them more valuable to your clients. Click To Tweet
It’s also like what you’re saying, if people have a hard time understanding, like, “Dominique, what are you talking about with this whole value thing?” It’s based on what results you are bringing to your client. What are the outcomes that they will receive? What is in it for your client? It’s the power of leverage. I love that. In your industry, talking with hundreds of accountants, it’s having the leverage and knowledge that you have with consumers like me who don’t understand a thing that you’re talking about and every person hates the tax stuff.
I know not you or anyone reading but if you think about the power of the leverage and knowledge that you have, it’s like a brain surgeon. There are not many people that can do the work that you do. To also believe in that yourself and have that belief of the value that you are worth, you keep listening to Dominique and she’ll make sure you understand it. Is there anything else on the value-based pricing model since that’s the one you recommend out of all the ones we spoke about?
It’s because it’s the easiest to apply here. You brought up a brain surgeon. That’s a great example. One thing that brain surgeons do very well that we don’t in our industry is communicating about results. The brain surgeon isn’t focusing on how many stitches is he going to put in, how many cuts he is going to make or how much gas are they going to use from the anesthesiologist. Yet, we find ourselves as accountants often talking about the inputs.
We focus on how long it will take us, what forms we’re going to use and how many transactions we had to record or have to record. People don’t care about that. What they care about is, “Doc, when I get out of this, I’m going to have a new knee. Doc, when I get out of this, I’m going to have a new heart and I have a new lease on life.” “Accountant, I’m going to get that loan that I need for my business because of the work that you did.” Yes, you should capture a part of what you’re enabling that person to do. The most important part is understanding yourself and what it is that’s valuable. If you aren’t currently doing something that’s highly considered valuable, change it.
This other analogy that you said is the doctor provides people with a new lease on a body part or life. For the people that got their life back, you’re providing people with opportunities financially that no one else could do. A lot of people aren’t equipped to do it because they’re so busy doing that lower-value work at hourly rates.
It’s what’s best for your clients as well. I have to tell you and I’ll admit, for years and years in my practice, I’m trying to cut as many corners as I can because I’m bursting at the seams with too much work to do and not enough time. Are there things more that I could have looked for? Yes, I did my best to find everything that I could in the time that I had that I was getting paid for but there’s always more that can be done. In a value pricing model, it takes however long it takes. I love that because the client is front and center. They’re my focus and I’m going to do whatever’s best for them. They enjoy that as well.
Dominique, for anyone reading who’s thinking, “I want to do this, I have no idea what to do next,” what are the 1, 2 or 3 things that you would recommend as next steps for any accountant reading?
Number one, identify what it is that you do that adds value and quantify that value. Let that value give context to your pricing. How should you set your prices? Surprise, you should set your prices based on what profit you want to make. How much profit do you want to have at the end of the year? What’s the maximum number of hours you want to work? That should drive your pricing. Not the market rate or the current hourly billing at the competitor down the street. It should be based on what you want and what helps you create the business that’s going to support the life that you want. The second step is to set pricing according to what’s going to work best for you.
What is the third step?
The third step is you have to have a way to communicate about that and that might take collaboration. Go on the message boards. Join a group of people that can have this conversation together to talk about how you communicate that to clients in a way that gets them excited about paying 5, 10 or 20 times what they’re used to paying. You can do it and have them very excited about it. It’s all because of how you communicate the value you bring.
To recap everything that the most amazing Dominique Molina has been sharing, focus on what kinds of results you are creating for your clients. Are you going to be improving their take-home pay, cutting their budgets, decreasing expenses and increasing profits? Value pricing is about capturing a piece of that value. Also, what is the maximum amount the client will pay? Have that in mind and have it all relate to the results that you’re going to provide to your clients. What are those outcomes that you’re going to provide?
I love every little bit of that. There’s this great quote that I know about pricing and it’s from the CEO of ProfitWell. “Pricing is the exchange rate you put on all the tangible and intangible aspects of your business.” It’s the value for cash and that guy’s name is Patrick. It ties in so nicely here. Thank you so much, Dominique, for joining us here on the show. It was an honor to have you.
Thank you so much, Michelle.
Thank you all so much for joining Dominique and me on the show. It is always an honor to be here with you. Talking with Dominique about value pricing and how that’s changed her whole life, not only in her firm but for her personally and her clients and providing the top-notch service that she delivers can also make a difference to you.
I would love to hear from you. If you have personally benefited from reading the show, please send me an email with your story to Hello@ThePitchQueen.com. I would love to see your stories and I will share them with others right here on the show in future episodes. Also, if you have a quick second, please leave me a rating and review on iTunes and subscribe to the show. I do always love hearing from you. Thanks again for reading.
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